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The Growth and Welfare Consequences of Differential Tariffs With Endogenously-Supplied Capital and Labor

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  • Philip L. Brock
  • Stephen J. Turnovsky

Abstract

This paper analyzes the impact of differential tariffs on consumption and investment in a specific factors model of a small open economy in which capital is accumulated over time. Particular attention is devoted to the welfare aspects. highlighting the cost of the intertemporal distortions produced by protective trade policies. Several specific welfare propositions are obtained. First, tariff protection is shown to create short-run benefits but long-run costs in welfare. Secondly, the second-best policy for the two tariffs is characterized. Finally, several propositions summarizing the implications of our analysis for tariff reform are derived.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4011.

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Date of creation: Mar 1992
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Publication status: published as Brock, Philip L. and Stephen J. Turnovsky. "The Growth And Welfare Consequences Of Differential Tariffs," International Economic Review, 1993, v34(4), 765-794.
Handle: RePEc:nbr:nberwo:4011

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  1. Maurice Obstfeld, 1988. "Fiscal Deficits and Relative Prices in a Growing World Economy," NBER Working Papers 2725, National Bureau of Economic Research, Inc.
  2. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
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  8. Brock, Philip L., 1988. "Investment, the current account, and the relative price of non-traded goods in a small open economy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 235-253, May.
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  15. Partha Sen & Stephen J. Turnovsky, 1988. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," NBER Working Papers 2781, National Bureau of Economic Research, Inc.
  16. Brecher, Richard A. & Findlay, Ronald, 1983. "Tariffs, foreign capital and national welfare with sector-specific factors," Journal of International Economics, Elsevier, vol. 14(3-4), pages 277-288, May.
  17. Neary, J Peter & Ruane, Frances, 1985. "International Capital Mobility, Shadow Prices and the Cost of Protection," CEPR Discussion Papers 58, C.E.P.R. Discussion Papers.
  18. Kenneth L. Judd, 1984. "The Welfare Cost of Factor Taxation in a Perfect Foresight Model," Discussion Papers 643, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  19. Anne O. Krueger, 1983. "Trade and Employment in Developing Countries, 3: Synthesis and Conclusions," NBER Books, National Bureau of Economic Research, Inc, number krue83-1.
  20. Frenkel, Jacob A & Rodriguez, Carlos Alfredo, 1975. "Portfolio Equilibrium and the Balance of Payments: A Monetary Approach," American Economic Review, American Economic Association, vol. 65(4), pages 674-88, September.
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  22. Bertrand, Trent J & Vanek, Jaroslav, 1971. "The Theory of Tariffs, Taxes, and Subsidies: Some Aspects of the Second Best," American Economic Review, American Economic Association, vol. 61(5), pages 925-31, December.
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Cited by:
  1. Christian Keuschnigg, 1996. "Overshooting adjustment to tariff liberalization," Open Economies Review, Springer, vol. 7(3), pages 237-255, July.

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